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Laurentian board finally to vote on 2020-2021 financials, showing nearly $66M shortfall

Its deficiency of revenue over expenses is due to $79.1M in restructuring expenses
Laurentian University campus (winter)

Even though its 2020-2021 financial year is long since over, Laurentian University’s board of governors will vote on whether to approve the financial statements from that year at a March 7 special meeting.

This as Laurentian continues to undergo insolvency restructuring after filing for creditor protection under the Companies’ Creditors Arrangement Act (CCAA) a little more than a year ago.

Sudbury.com has obtained a copy of the agenda and board package in advance of the meeting, which includes a draft of Laurentian’s 2020-21 financial statements.

The following motion is up for discussion during the meeting: “that the Board of Governors approve the Consolidated Financial Statements of Laurentian University of Sudbury for the year ending April 30, 2021, as presented at its meeting of March 7, 2022.”

The draft financial statements, prepared by Laurentian management and audited by the firm KPMG, show that Laurentian’s deficiency of revenue over expenses (i.e. deficit) was $65.9 million in the last financial year.

This is attributable to restructuring expenses of $79.1 million.

That includes more than $44 million for “employee restructuring and termination costs,” $24.7 million for termination of interest rate swaps (these were agreements with banks - terminated with the CCAA filing - to manage the volatility of interest rates), $4.9 million for legal fees and $2.8 million for monitor fees.

Of that $79.1 million in restructuring costs, the draft financial statements say more than $70 million are “liabilities subject to compromise,” relating to what Laurentian may eventually pay out to creditors under the CCAA claims process.

Without the restructuring expenses, there’s an adjusted surplus of $13.2 million, according to a PowerPoint presentation included as part of the board package.

KPMG also looked over the financial statements from the previous financial year, 2019-2020, and corrected what they refer to as “immaterial prior period errors.” 

The deficiency of revenue over expenses (deficit) for 2019-2020 has changed from $3.1 million to nearly $3.4 million.

The draft financial statements say Laurentian owes three Canadian banks almost $89 million in long-term debt (down from more than $91 million a year before). Due to the CCAA proceedings, Laurentian “is in default” on its long-term loan agreements.

As it has gone through insolvency restructuring over the past year, Laurentian has seen delays in publishing its 2020-2021 audited financial statements.

Ernst & Young, the firm acting as the court-appointed monitor of Laurentian’s insolvency restructuring, went into detail about the situation in its 10th report, which was released late in January.

According to the Broader Public Sector Accountability Act, Laurentian is required to publish audited financial statements within six months of its fiscal year-end, which was April 30, 2021. So Laurentian’s deadline to do so was Oct. 31, 2021. 

Ernst & Young noted that in exceptional circumstances, the chair of the Treasury Board can extend the date by when these documents must be publicly available. 

Laurentian’s lack of audited financial statements for the last fiscal year also attracted the attention of the Canada Revenue Agency. 

The CRA gave Laurentian University notice in December that it would revoke LU’s charity registration if its information return were not filed within the next 45 days.

As a registered charity, Laurentian must file an annual Registered Charity Information Return with the Canada Revenue Agency within six months of its fiscal year-end (also by Oct. 31, 2021).

On Jan. 15, Laurentian filed its annual information return with CRA prior to the expiry of the 45-day window, appending its then current unaudited financial statements.

In late September, Laurentian advised Ernst & Young that due to the limited resources within LU’s finance team and numerous competing priorities, including responding to the Auditor General of Ontario’s audit team, it would not be in a position to complete the preparation of its 2020-2021 financial statements and have them audited by Oct. 31.

Similarly, as the CRA return requires financial statement information and financial statements to be appended, it would be unable to complete the CRA return by the same deadline.

Given this situation, additional accounting resources from Ernst & Young were brought in to provide assistance to Laurentian’s finance team.